Magazine article Government Finance Review

Mid-Year Washington Roundup

Magazine article Government Finance Review

Mid-Year Washington Roundup

Article excerpt

The new Democratic majority was anxious to begin its work in January, hoping to tackle many issues important to local and state governments. This Federal Focus article examines just how far Congress, now mid-way through its first year, has come in moving forward on issues important to the public sector.

FEDERAL BUDGET

Unlike last year, House and Senate leaders are insisting on working within the confines of the budget resolution passed this spring, and completing the 13 appropriation bills prior to the end of the fiscal year on September 30. The nonbinding budget resolution provides a blueprint for congressional action on the authorization and appropriation bills, and many hearings already have been held providing insight into Congress' priorities under the new leadership. Most importantly for state and local governments, Congress will likely reject proposals from the President to cut programs such as first responder homeland security grants, community development block grants, Amtrak and transportation funding, community policing grants, and water infrastructure funding. Final legislation on these programs for FY08 will not be completed until later this year.

3 PERCENT WITHHOLDING AND REPORTING REQUIREMENT ON GOVERNMENT PAYMENTS

Legislation has been introduced in the House and Senate to repeal Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (PL. 109-222), which requires state and local governments that spend more than $100 million on goods and services to withhold 3 percent of payments to all vendors, beginning in 2011.

In the House, Congressmen Kendrick Meek (D-FL) and Wally Herger (R-IL) introduced H.R. 1023 and in the Senate, Senator Larry Craig (R-ID) introduced S. 777. The GFOA and other state and local government associations (including the National Association of State Auditors, Comptrollers and Treasurers; the National League of Cities; and the National Association of Counties) support legislative efforts to eliminate this unfunded mandate that would cause significant administrative and financial burdens to governments across the country.

To assist with these efforts, GFOA members are encouraged to complete a survey that will enhance our ability to demonstrate to Congress the devastating impact this law will have on state and local governments. The survey for local and state governments may be found at http://www2.nasact.org/ withholdings/survey.htm.

In addition to the withholding provision, Section 511 also calls for annual reporting of all payments made by governments beginning in 2011. In his proposed FY08 budget, President Bush called for the implementation date of the reporting requirement to be moved up to January 1, 2008. The GFOA is monitoring whether this initiative gains traction in Congress, as there would be insufficient time as well as unfunded costs borne by state and local governments to adhere to such legislation.

HEALTH CARE

Legislative initiatives to address spiraling health care costs as well as lack of access to health care continue to circulate among the administration and congressional Republicans and Democrats alike.

President's Proposal. In his State of the Union address and again in his fiscal year 2008 budget proposal, the President presented his ideas for health care reform. Under current law, the value of health coverage provided by an employer-sponsored plan is exempt from income, Social Security, and other payroll taxes. The President's proposal would eliminate this exclusion and treat employer-sponsored health coverage as taxable income to employees and retirees. In its place, the President's proposal recommends a $15,000 annual tax deduction to married couples ($7,500 to singles), whether they purchase health insurance through their employer or on their own.

Many Democrats have expressed concern that the President's proposal would undermine the employer-based health system through which so many Americans receive health care benefits, and it is not likely to become a viable reform option. …

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